The enhanced nexus between technology and financial services over recent years has led to legislative amendments in the banking and finance sector brought by the Finance (Miscellaneous Provisions) Act, 2021 (Finance Act).

The objective of the amendments is to strengthen the development of key sectors, such as innovation in terms of fintech and regtech.

This article highlights amendments made by the Finance Act to the Bank of Mauritius Act, 2004 (BoM Act), the Banking Act, 2004 (BA), and the Financial Services Act, 2007 (FSA), and their impact on the fintech and regtech sectors.  

Fintech and Regtech

Changes brought by the Finance Act to transform the traditional financial services system and make it more efficient, effective and resilient are as follows:

• The amended BA now includes definitions for ‘fintech’, ‘regtech’ or ‘regulatory technology’, ‘regulatory sandbox’ and ‘regulatory sandbox authorisation’.
• ‘Fintech’ is defined as technologically-enabled financial innovations that could result in new business models, applications, processes or products with an associated material effect on financial markets and institutions and the provision of financial services.
• ‘Regtech’ relates to the innovative technology solutions utilised by financial institutions and other regulated entities to facilitate compliance with regulatory rules and requirements.
• The FSA has been amended to cater for the issuance of a regulatory sandbox authorisation by the Financial Services Commission of Mauritius (FSC) to existing licensees and other bodies corporate.

Regulatory sandbox authorisation

Any financial institution, licensee under the National Payment Systems Act, 2018 or the FSA, or body corporate will be eligible to apply for a regulatory sandbox authorisation. Such authorisation will provide a controlled environment where innovative products can be tested prior to making an application for a licence and to being made subject to the regulatory requirements.

This will likely attract more investors and professionals in the field, given that they may test their products without incurring any licence-related costs. This is because they will only be required to make an application to the Bank of Mauritius (BoM) in respect of banking-related services or the FSC in respect of its non-banking-related services, for the relevant licence once the BoM or the FSC, as applicable, is satisfied of the successful experimentation of the fintech, regtech or any other relevant innovation-driven financial services.

Regulatory sandbox licences

The issuance of regulatory sandbox licences was previously under the aegis of the Economic Development Board but remained under the purview of the FSC. Investors are now required to apply to the BoM or the FSC for a licence, depending on the nature of their activities.

This amendment is likely to be beneficial on the practical side as it brings along reduced processing time because such licences will now be issued by the same competent authority that initially assessed the application for, and issued, the authorisation.

Establishment of a fintech innovation hub and digital Lab

The BA and the FSA have been amended in line with the Government’s vision to establish Mauritius as a leading regional fintech hub.

The BoM will provide supervisory oversight and may seek the collaboration of any financial institution or public or private sector agency for the establishment of the fintech innovation hub and digital lab in respect of banking-related financial services.

The FSC will be responsible for the setting-up of a fintech innovation hub and a digital lab to foster and assist technological developments in the non-banking financial services sector.

A regulated platform will assist in the development of fintech products and service by encouraging investors to establish themselves in Mauritius and existing fintech entrepreneurs to continue or boost their operations in the country. A regulated platform will provide more clarity, thereby, positively influencing investors and encouraging the entrepreneurship culture in the fintech field.

Other Notable Changes Brought by the Finance Act to the BA

Duty of confidentiality

The duty of confidentiality imposed on licensees by section 64(3) of the BA will not apply where disclosure is necessary to any court or to enable a financial institution to make a complaint or lodge a report for investigations. 

This amendment seems to be in line with the measures being adopted by the authorities against money laundering and terrorist financing.

Money market instrument: eligibly criteria

To promote the development of a domestic market in respect of money market instruments, the eligibility criteria for issuing a money market instrument have been amended.

There is no longer a requirement for an applicant to have an operating cash flow of at least the size of the issue of the money market instrument.

This is in line with international practices and will make Mauritius more attractive to investors.

Appointment of auditors

There has been an amendment to the term of appointment of auditors. Where auditors have been providing services to a financial institution for a continuous period of five years or less, the auditors may not provide audit services to the same financial institution unless a period of three years (as opposed to the initial five-year period) from the date of termination of the last audit assignment has lapsed.

Further, subject to certain conditions being met, the appointment of an audit firm of a subsidiary of a foreign bank, for another additional five years, is now possible.

Other Notable Changes Brought by the Finance Act to the BoM Act

Digital currency

The BoM Act has been amended to cater for a framework to be established under which digital currency may be issued by the BoM and may be held or used by the public. Legislative amendments were brought last year to introduce the issuance of digital currency by the BoM whereas this year’s legislative amendments go a step further by permitting a framework to be established for the issuance of digital currency.

The BoM may now, for the purposes of issuing digital currency, accept deposits from, and open accounts for, these persons.

Making, altering or using counterfeited digital currencies have been added as a criminal offence under the BoM Act with a fine not exceeding one million rupees and penal servitude. 

With the speeding-up of the adoption of digital payments, it is likely that the BoM will be issuing rules with a view to providing further clarity concerning the mechanism regarding the use of digital currency in Mauritius.

Separately, the introduction of the Central Bank Digital Currency to support the operation of faster payment systems, and to complement and bridge existing gaps which the traditional monetary system may struggle to fulfil, is also anticipated for the end of 2021.

Central KYC and Accounts Registry

The existing Central KYC Registry is now known as the Central KYC and Accounts Registry. 

In addition to collecting KYC records submitted by their customers, information on accounts maintained by customers (other than the amount held in the accounts) will also be collected. This is a welcomed change as it facilitates the reporting of alleged or suspected money laundering offences.

Credit scoring

In line with international practices, the BoM Act has been amended to enable the Credit information Bureau to provide credit scores representing the credit exposure of customers.

Sustainable bonds

The BoM may now issue guides, guidelines, directives, rules or instructions regarding the framework for the issue of sustainable bonds, including blue and green bonds. 

Other Key Developments in the Financial Services Sector

Various initiatives taken to sustain development of the financial services sector include:

Launch of the FSC One Platform

With the aim of having Mauritius embark on a revolutionary era of digital progress for financial services, the FSC launched its digital platform, FSC One, on 12 August 2021.

The platform has been functioning properly since its launch. As at 5 October 2021 (as per communiqué issued by the FSC on 5 October 2021), 33 applications have been initiated through the platform and three have been licensed by the FSC.

The online licensing platform will improve the ease of doing business in Mauritius and reduce delays associated with assessing investors and processing applications for licences, including regulatory sandbox licences.

Regulatory information is also easily accessible and investors are empowered to self-manage information on the platform making for an improved user experience. 

Introduction of the Mauritius Central Automated Switch national QR code

On 20 September 2021, the BoM successfully launched the Mauritius Central Automated Switch (MauCAS) QR code as a new method of payment on the BoM’s MauCAS platform.

This is another milestone in the modernisation and democratisation of the payment eco-system given the current international trend of moving from a cash-dominated economy to one that is digitalised, and the accelerated demand for digital payments amidst the challenges of the COVID-19 pandemic.

New legislation: virtual asset businesses

To sustain the development of the financial services industry, The Virtual Asset Business Bill, which provides a framework to regulate virtual asset businesses, has been proposed in line with international standards and is being administered by the FSC. 

The proposed Bill makes provisions for the:

• licensing, supervision and monitoring of virtual asset service providers;
• registration procedures and requirements for the issuance of initial token offerings;
• technical requirements, governance structures, risk management and information disclosure issues for virtual asset service providers;
• protection of the interests of clients of virtual asset service providers; and
• ability to comply with the Financial Action Task Force standards on anti-money laundering and combatting the financing of terrorism, activities related to the proliferation of weapons of mass destruction and any related matters.

Under the proposed Bill ‘virtual asset’ is defined as a digital representation of value that can be digitally traded, or transferred, and can be used for payment or investment purposes but does not include digital representations of fiat currencies, securities and other financial assets that are already covered in the Securities Act.

‘Virtual asset service provider’ means a person who, as a business, conducts one or more of the following activities or operations for, or on behalf of, another person:

• exchange between virtual assets and fiat currencies;
• exchange between one or more forms of virtual assets;
• transfer of virtual assets;
• safekeeping and/or administration of virtual assets or instruments enabling control over virtual assets; or
• participation in, and provision of, financial services related to an issuer’s offer and/or sale of a virtual asset.

Fintech service-provider licence

The FSC has issued a consultation paper regarding the regulatory framework for the fintech service-provider licence as a result of the increasing numbers of financial institutions turning to regulatory technology to assist them in meeting their statutory obligations.

A proper regulatory framework will certainly attract investors and promote the development of industry expertise in this field of activity.

Final Note

The above-mentioned measures such as the setting up of an open lab by the BoM and the FSC, the creation of a Fintech Innovation Hub and the piloting of a Central Bank Digital Currency by the BoM, together with a proposed bill for virtual assets, demonstrate the Government’s will to provide new ways to access banking services in Mauritius, while fostering the development of a robust digital banking business in Mauritius.

The focus on innovation and sustainability will serve the country well as it seeks to reinforce its role as an investment hub for Africa.  The establishment of a fintech hub, in particular, will attract new, more dynamic and innovative investors.

A proper regulatory framework and guidelines will enhance investors’ confidence – attracting new fintech entrepreneurs and encouraging those already operating in the country.

It is undeniable that the future of the banking and finance sector in Mauritius looks promising.